Delhi begins cutting costs, shelves expensive projects
nNEWDELHI: The Delhi government has initiated cost-cutting measures by freezing the dearness allowance (DA) and dearness relief (DR) of its employees and keeping any proposal for spending not related to the Covid-19 outbreak in abeyance till June 30.
The move comes amid a substantial hit to revenues with a complete shutdown of industries and trade due to the nationwide lockdown to stave off the spread of Covid-19. The Aam Aadmi Party (AAP) government has been able to generate only ₹400 crore in tax revenues in April -- a tenth of its projected collections.
In order to cover the massive deficit, the administration has been ordered to cut expenditure and take measures to put the economy on the road to recovery.
On Monday, the city-state’s finance department issued an order to every state department, corporations and others, asking for all projects to be placed under “abeyance”. It stated that no proposal be submitted to the finance department for approval till June 30, unless it is an “activity/work” that cannot be postponed.
The fresh order was issued after the government observed that departments were “sending files to the finance department for seeking relaxations and approvals” on different pretexts, even after it stated on April 8 that only Covid-19-related activities will be granted funds.
In an interview with HT on Monday, deputy chief minister Manish Sisodia, who is also Delhi’s finance minister, said that even if the lockdown is totally lifted, no government project will take off for at least two to three months. “Particularly construction projects, because they are capital-intensive. Paying salary is our priority. Only after that will we decide which flagship schemes to spend on depending on the funds’ situation,” he said.
The state government’s decision to freeze DA and DR will affect around 220,000 employees and pensioners of Delhi government till July 2021. They will continue to receive DA and DR at the current rate of 17%.
Sisodia presented a ₹65,000 crore budget in March, the biggest by fiscal size for any government in Delhi. Besides other components, the government had estimated ₹44,100 crore in tax revenues, excluding a GST compensation of ₹7,800 crore.
As per the Delhi Budget 2020-21 documents, of the estimated ₹44,100 crore tax revenue, excise accounted for ₹6,300 crore and ₹30,000 crore was to come from GST and VAT.
While the government expected to mop up ₹5,300 crore in stamps and registration fee, another ₹2,500 crore were expected to be earned in taxes on motor vehicles.
With all trade and industry shut, liquor shops closed and almost zero new registration of property or vehicles, the government’s revenue estimates have taken a debilitating hit.
“The Delhi government is not even considering taking up any of its major projects, especially anything related to infrastructure. Construction works be it of schools or roads will take a pause. What we are thinking of starting with are soft projects such as notifying the electric vehicle policy or the tree transplantation policy,” said a senior official.
Now, with the Centre coming up with fresh guidelines to relax rules under Lockdown 3.0, which will continue till May 17, the Delhi government has launched a graded response to jump start the economy. On Tuesday, the government levied additional cess on liquor and fuel. While an additional 70% corona cess was levied on sale of all liquor in the city on late Monday evening, the government announced 30% hike in value-added tax (VAT) on petrol and diesel.
Officials said with the government struggling to pay salaries of its employees, these measures will bring in money to run the machinery and pay for urgent measures required to fight coronavirus. As per the Budget document, excise makes for 14% of the total tax revenue.
“But these will give only limited gains to the government. In the case of liquor sale, firstly only around 150 shops of over 800 have been shortlisted to open. Secondly, almost 90% of these 150 shops are not even being able to operate for the full permissible time of 9am to 6.30pm because of crowding.so, the revenue is very negligible as of now,” said a senior official in the excise department.
The Delhi government also opened sub-registrar offices for registration of property.
“Registrations have opened in all sub-registrar office from today. Twenty-six applications were received today,” Sisodia announced in a tweet in Hindi on Tuesday. Stamps and registration fee make up for 12% of the estimated revenue for the current financial year.